Chapter

5--The
Environment Key

Global

1. No organization is insulated from the effects of foreign

markets and competition.
TRUE
2. We can identify four distinct levels of international
activity that differentiate organizations.
FALSE
3. MNC stands for multiple nations and continents.
FALSE
4. Only two of the worlds ten
headquartered in the United States.

largest banks are

TRUE
5. Importing involves merchandise but not services.
FALSE
6. Licensing is the easiest way of entering a new market.
FALSE
7. Maquiladoras face competition in China.
TRUE
8. A strategic alliance and a joint venture are the same
thing.
FALSE
9. Magna International Inc., a Canadian company, offered
to buy Opel, a German company, from GM. This is
an example of direct investment.
TRUE

10. International licensing agreements involve regulations

for truckers transporting products between countries.
FALSE
11. Most MNCs use direct investment exclusively because
they are so big they can afford to buy companies.
FALSE
12. France has a relatively low level of government
ownership among the market economies.
FALSE
13. Market systems are clusters of countries that engage
in high levels of trade with one another.
TRUE
14. High-potential/high-growth economies have
relatively underdeveloped and immature and, until

been

recently, were characterized by weak industry, weak

currency, and relatively wealthy consumers.
FALSE
15. Political stability in the Middle East makes it a less
risky place to conduct business.
FALSE
16. Most countries have pure systems of
ownership or pure systems of public ownership.

private

FALSE
17. Stability can be viewed in two ways?as the ability of a
given government to stay in power in the country
and as the permanence of government policies toward
business. A country that is stable in both respects is

preferable because managers have a higher probability of

successfully predicting how government will affect
their businesses.
TRUE
18. Export restraint agreements are accords signed by two
parties that voluntarily limit the volume or value of
goods exported to a particular country.
TRUE
19. Dumping is selling items for more than fair market
value.
FALSE
20. A country's culture includes all the values, symbols,
beliefs, and language that guide behavior.
TRUE
21. Packaging for rice should be green because all
countries think green is healthy.
FALSE
22. Geert Hofstede identified five fundamental differences
that can be used to characterize people in different
cultures. They are time, power, age, race, and gender.
FALSE
23. People who exhibit short-term outlook behaviors tend
to place a high premium on material possessions,
money, and assertiveness.
FALSE
24. In contrast to MNCs, medium-size organizations doing
business abroad are much more selective about the

markets they enter.

TRUE
25. Fewer and fewer small organizations are also finding
that they can benefit from the global economy.
FALSE
26. To effectively plan and make decisions in a global
economy, managers need to understand local market
conditions and technological factors that will affect their
operations.
TRUE
27. Japanese firms give managers of their foreign
operations relatively great responsibility. As a result, top
executives frequently travel to the foreign operations.
FALSE

28. Renata is a tax attorney in Germany. Her service is

a(n) ____ business.
A. international
B. domestic
C. multinational
D. intercontinental
E. global

29. American Eagle is a regional airline that flies in the

United States and Canada. It is an example of a(n) ____
business.

A. international
B. domestic
C. multinational
D. intercontinental
E. global

30. A(n) ____ business is one that is primarily based in a

single country but that acquires some meaningful
share of its
countries.

resources

and/or

revenues

from

other

A. international
B. domestic
C. multinational
D. intercontinental
E. global

31. Coca-Cola is based out of Atlanta but reaches into

hundreds of countries. The product is locally packaged,
but the cola inside is essentially the same throughout the
world. Coca-Cola is edging closer to being a(n) ____
business.
A. international
B. domestic
C. multinational
D. intercontinental
E. global

32. Boeing sells planes to commercial airlines around the

world. It has suppliers around the world too. The
defense side of Boeing sells primarily to the federal
government. It is a(n) ____ business.
A. international
B. domestic
C. multinational
D. intercontinental
E. global

33. eBay is based in San Jose. Buyers and sellers on the

site are located around the world. eBay is a(n) ____
business.
A. international
B. domestic
C. multinational
D. intercontinental
E. global

34. A(n) ____ business transcends national boundaries and

is not committed to a single home country.
A. international
B. domestic
C. multinational
D. intercontinental
E. global

35. Which of the following statements can be used to

explain the growth of international business?
A. Many countries in Europe and Asia were
devastated after World War II and had to be rebuilt.
B. The postwar population boom decreased demand for
products.
C. Changes in cultural traditions made the rest of the
world open to all of the products made in the United
States.
D. Infrastructures in Europe and Asia remained sound in
spite of World War II.
E. All of these choices

36. Which of the following describes what has occurred in

international business from 1960-2000?
A. Although still increasing, international trade has grown
at a slower rate since 1980.
B. The volume of international trade increased more
than 3000 percent.
C. U.S. investment overseas has been on the decline for
the past two decades.
D. The majority of the world's largest firms are firms with
headquarters inside the United States.
E. All U.S. firms still earn the majority of their sales and
profits in the United States.

37. Which of the following is the least intense level of

international business strategy?

A. Importing/exporting strategy
B. Joint venture
C. Licensing strategy
D. Direct investment
E. Global sourcing

38. United States farmers are the biggest producers of

corn. China's demand for corn has increased. The U.S. is
a corn ____.
A. importer
B. direct investor
C. global sourcer
D. exporter
E. joint venture

39. Two U.S. companies Cargill and Archer Daniels Midland

purchase 25% of the world cocoa supply from
farmers in West Africa. These companies use
A. importing.
B. direct investment.
C. global sourcing.
D. exporting.
E. joint venture.
40. ____ is the least risky type of international business in
which firms usually become involved.

A. Importing/exporting
B. Licensing
C. Joint venture
D. Global sourcing
E. Direct investment

41. Which of the following is NOT a potential disadvantage

associated with an import/export operation?
A. Some products are restricted and cannot be imported or
exported.
B. Products may miss the needs of a large segment of the
market because they are not adapted to local
conditions.
C. There is a great deal of risk involved compared
to other strategic alternatives.
D. Imports/exports are subject to taxes, tariffs, and higher
transportation expenses.
E. All of these choices

42. A(n) ____ strategy requires little initial investment, is

heavily regulated, and provides little opportunity to
modify products for local conditions.
A. importing/exporting
B. licensing
C. joint venture
D. global sourcing

E. direct investment

43. Which of the following statements does NOT describe

a characteristic of importing/exporting?
A. Importing/exporting is an easy way to enter a market.
B. There is very little risk involved with importing and
exporting.
C. The cost of importing/exporting may be high due to
transportation costs.
D. Due to government restrictions, not all products can be
imported or exported.
E. The costs of initiating an import/export strategy
are high.

44. A disadvantage of importing/exporting is

A. inflexibility.
B. competition.
C. shared ownership.
D. complexity.
E. government restriction.

45. In the U.S. Starbucks does not franchise. It has a(n)

____ agreement with Barnes and Noble.
A. importing
B. exporting
C. strategic

D. global sourcing
E. direct investment

46. The National Football League and team owners allow

shirts, hats, blankets, and many other products to be
sold with team logos on them. The teams and league get a
percentage of the sale. The teams have chosen to use
a(n) ____ strategy to generate more income.
A. joint venture
B. licensing
C. direct investment
D. exporting
E. global involvement

47. Which of the following is NOT a reason for using a

licensing agreement as a means of entering international
business?
A. Low levels of risk
B. High domestic production costs
C. Government regulation
D. Increased/extended profitability of technology
E. Excessive transportation costs

48. Rest stops in New Jersey have Burger King restaurants.

The NJ Transit Authority and Burger King use a(n)
____ strategy.

A. importing/exporting.
B. licensing.
C. outsourcing.
D. direct investment.
E. strategic alliance.

49. China requires foreign companies to form ____ with

Chinese companies so that the Chinese get access to
the latest technology. China forces a(n) ____ strategy.
A. importing/exporting
B. licensing
C. outsourcing
D. direct investment
E. a joint venture/strategic alliance

50. A(n) ____ strategy involves a partnership with a longterm commitment that can be used to acquire new
technology and information.
A. direct investment
B. joint venture
C. licensing
D. importing/exporting
E. pure domestic

51. ____ is the form of international business involvement

in which two or more firms have an equity position
in an operation.
A. A joint venture
B. Direct investment
C. A maquiladoras arrangement
D. A strategic alliance
E. International brokering

52. Which of the following is a disadvantage of joint

ventures/strategic alliances?
A. More rapid market entry
B. Access to technology
C. Access to raw materials
D. Reduced risk
E. Shared control over operations

53. ____ strategy is considered the highest level of

involvement in international business.
A. Importing/exporting
B. Licensing
C. Joint venture/strategic alliance
D. Franchising
E. Direct investment

54. Which of the following statements about maquiladoras

is FALSE?
A. Maquiladoras are light-assembly plants built in northern
Mexico.
B. There are more than 1000 maquiladoras employing
workers.
C. Maquiladoras are a form of licensing.
D. Maquiladoras are owned by major corporations from the
United States, Japan, and South Korea.
E. Maquiladoras are a form of direct investment.

55. Compassion International is a children's charity that

provides basic necessities, schooling, and job training for
poverty-stricken children around the world. This not-forprofit organization would require which type of
investment when it enters a new country?
A. Direct investment
B. Joint venture
C. Licensing
D. Importing/exporting
E. Franchising

56. Starbucks owns one third of its stores outside the U.S.
Those stores are
A. a direct investment.
B. a joint venture.

C. licensing.
D. a strategic alliance.
E. franchising.

57. The advantage of direct investing is

A. access to materials and technology.
B. quick market entry.
C. enhanced control.
D. little risk.
E. small cash outlay.

58. McDonalds operates restaurants around the world in

airports. The agreement between McDonalds and the
airports is a(n)
A. global sourcing agreement.
B. strategic alliance.
C. global business.
D. exporting agreement.
E. direct investment.

59. Opponents to the maquiladoras concept are most

critical of its
A. high production cost.
B. exploitation of human resources.
C. legality.

D. waste of raw materials.

E. high transportation costs.

60. The major reason so many companies from all over the
world are embracing the maquiladoras concept is
because of
A. lower transportation costs.
B. its efficient use of raw materials.
C. its ability to avoid regulatory problems.
D. improved technology.
E. cheap labor.

61. Which of the following is a problem associated with the

implementation of a direct investment strategy?
A. Complexity of decision making
B. Sharing of profits
C. Loss of managerial control
D. Inability to purchase the brand identification of a
product
E. Having to develop an organizational infrastructure
62. Which of the following is the type of economy most
countries in the world are striving to attain?
A. Mature market economy
B. Industrializing economy
C. Communist economy
D. Developing market economy

E. Command economy

63. ____ economies are recognizable by their tendency to

allow market forces to determine business strategies
and to have private ownership of property.
A. Communist
B. Market
C. Industrializing
D. Pure competition
E. Socialist

64. Germany is a mature market economy. One major

problem GE expected to face when it began operating in
Germany was
A. cultural barriers.
B. fluctuations in political relations.
C. taking market share from established firms.
D. government regulation of trade.
E. an underdeveloped infrastructure.

65. U.S. managers have the least difficulty operating in

____ economies.
A. market
B. communist
C. industrializing

D. developing
E. pure competition

66. The U.S. government became the majority shareholder

in GM in 2009. The Obama administration was
moving the U.S. away from a ____ economy.
A. command
B. developing
C. mixed
D. communist
E. market

67. Which of the following countries does NOT have a

mature market economy?
A. Germany
B. Korea
C. Sweden
D. Iran
E. Spain

68. Which of the following countries is NOT a member of

the European Union (EU)?
A. Belgium
B. Luxembourg
C. Italy

D. Ireland
E. Ukraine

69. Which of the following is NOT an example of a mature

market system?
A. India
B. Japan
C. Sweden
D. The United Kingdom
E. The United States

70. With whom is the United States involved in a mature

market system?
A. The European Union
B. The Latin American Integration Association
C. The Caribbean Common Market
D. Canada and Mexico
E. Pacific Asia
71. Which of the following countries is NOT a member of
the European Union?
A. Romania
B. Hungary
C. Poland
D. Russia
E. Greece

72. Which of the following describes one of the reasons for

the establishment of the European Union?
A. Eliminate
countries

trade

barriers

between

member

B. Decrease tariffs on products from nonmember countries

C. Enhance movement of capital and labor between
nonmember nations
D. Increase the
nonmembers

usage

of

member

labor

pools

by

E. Gradually eliminate imports from nonmember nations

73. Which of the following countries is NOT part of Pacific

Asia?
A. China
B. The Philippines
C. India
D. South Korea
E. Australia

74. ____ is an example of a high-potential/high-growth

economy.
A. Syria
B. The Philippines
C. South Korea

D. China
E. Kuwait

75. One of the primary challenges facing those who would

like to enter a high-potential/high-growth economy
is
A. more infrastructure than can be used.
B. a large upper class.
C. a communist government.
D. potential consumers are poor.
E. None of these choices

76. Which of the following statements is NOT TRUE about

the WTO?
A. It replaced GATT.
B. It promotes trade between nations.
C. It reduces trade barriers through negotiations.
D. It actively
environment.

supports

human

rights

and

the

E. It resolves trade disputes between its members.

77. Which of the following is NOT one of the environmental

challenges identified in the text that complicates
international management?
A. Technological
B. Political

C. Economic
D. Cultural
E. Legal

78. Which of the following is an example of an economic

challenge faced by international managers?
A. Government ownership of all property
B. Absence of natural resources
C. Lack of communication capabilities
D. Poor transportation system
E. All of these choices

79. Which of the following is NOT an example of an

economic challenge faced by international managers?
A. Government ownership of all property
B. Unstable government
C. Absence of power plants
D. Lack of educational facilities
E. Few natural resources
80. Trees are a part of a country's
A. economic environment.
B. sociocultural environment.
C. infrastructure.
D. technological environment.
E. political-legal environment.

81. A nation's cost of living is part of its

A. economic environment.
B. cultural heritage.
C. task environment.
D. technological environment.
E. political-legal environment.

82. Satellites, shipping ports, railroads, and airports are

part of a nation's
A. natural resources.
B. political system.
C. cultural environment.
D. infrastructure.
E. technological environment.

83. As a manufacturing firm builds a plant in Bolivia, it also

has to build an airstrip so that it can get the building
supplies and the component parts it needs for operation to
the Bolivian facility. The building of the airstrip was
necessary because Bolivia has
A. limited natural resources.
B. an underdeveloped infrastructure.
C. too many competing airports.

D. no international trade incentives.

E. None of these choices

84. Which of the following is NOT a part of a nation's

infrastructure?
A. Its natural resources
B. Its highway system
C. Its airports
D. Its commercial distribution system
E. Its power plants

85. TransFair USA promotes fair trade programs so farmers

in developing countries can earn high enough
wages to afford adequate nutrition and basic health care.
TransFair is trying to change the ____ environment of
international management.
A. technological
B. cultural
C. political
D. economic
E. legal

86. An example of the economic system in China is

A. all postings on Qiangguo, the largest Internet bulletin
board in China, are censored.

B. bowling is the latest fad in China, with a new bowling

alley opening weekly.
C. calligraphy is viewed as a higher art form than painting
and drama.
D. one of China's greatest natural resources is its
labor pool.
E. the Chinese government has a one-child population
control.

87. Which of the following is NOT a factor of the politicallegal environment for international managers?
A. No incentives for international trade
B. The use of import quotas and tariffs
C. Infrastructure
D. Membership in an economic community
E. Government instability

88. According to the text, which of the following is a factor

of the political-legal environment for international
managers?
A. Infrastructure
B. The use of import quotas and tariffs
C. Natural resources
D. Language spoken
E. Religious beliefs

89. When Starbuck operates in other countries

customizes the snacks to local tastes. This is a(n) ____

it

challenge for international managers.

A. technological
B. cultural
C. political
D. economic
E. legal

90. In Japan apples are very expensive and are

traditionally presented as gifts. The apples are grown with
wrapping on each apple to prevent insects and ensure
perfect color. When Washington Apples wanted to export
to Japan it faced ____ barriers.
A. economic.
B. political-legal.
C. cultural.
D. infrastructure.
E. technological.

91. A U.S. recording company that wanted to take

advantage of the fact that European teens love everything
American would find it difficult to get its music played on
French radio stations. French radio stations are
required to play at least 40 percent French-made music.
This requirement indicates one way that the ____

environment challenges international management.

A. technological
B. cultural
C. political-legal
D. economic
E. natural

92. A developing country in South America offers your firm

a construction subsidy if you build your new plant
there. This is an example of
A. an economic challenge for international managers.
B. a control on international trade.
C. a mature infrastructure.
D. a bribe.
E. an incentive for international trade.

93. During a recession, governments tend to increase ____

to help protect domestic producers by directly
adding to the cost of foreign goods.
A. import quotas
B. export restraints
C. buy domestic laws
D. export tariffs

E. import tariffs

94. A(n) ____ is the most common form of trade restriction.

A. import tariff
B. export tariff
C. quota
D. embargo
E. maquiladoras

95. A tariff
A. cannot be collected by the exporting country.
B. can be collected only by the importing country.
C. can be collected by countries through which
goods pass.
D. cannot be used to raise money for a government.
E. cannot be used to increase the cost of foreign goods.

96. Which of the following statements about tariffs is

TRUE?
A. Tariffs can be collected by the exporting country.
B. Tariffs can be collected by the importing country.
C. Tariffs are taxes collected on goods shipped across
national borders.
D. Import tariffs are the most common kind of tariff used.

E. All of these choices

97. The U.S. government limits how many automobiles can

be imported into the United States annually. This is
a(n)
A. export restraint agreement.
B. import tariff.
C. embargo.
D. quota.
E. boycott.

98. The United States Department of Defense requires

some weapon systems to be made by U.S. companies for
national defense reasons. This is an example of
A. a quota.
B. an export restraint agreement.
C. nationalization.
D. buy national legislation.
E. None of these choices
99. ____ gives preference to domestic producers through
content or price restrictions.
A. A maquiladora
B. Nationalization
C. Privatization
D. Buy national legislation

E. A boycott

100. Labor unions in the United States would like to see

Congress pass domestic content laws that would
require, for example, that all automobiles sold in the
United States contain at least a specified percentage of
parts that were manufactured in the United States. Such
laws would fall under the heading of
A. import tariffs.
B. buy national legislation.
C. quotas.
D. export tariffs.
E. economic disincentives.

101. The cultural challenges of international management

include
A. natural resources.
B. the infrastructure.
C. government stability.
D. language.
E. All of these choices

102. Which of the following is an example of how cultural

differences directly impact international business
practices?
A. Government stability

B. Schools
C. Buy national legislation
D. Hospitals
E. Religious
women

practice

that

separates

men

and

103. A French ministry has banned the word e-mail from

official communication. Instead, the French words for
quick and mail have been combined to form a new word.
This is an official attempt to protect the French
A. political-legal system.
B. economic system.
C. cultural environment.
D. economic community.
E. natural resources.

104. An example of the cultural system in China is

A. all postings on Qiangguo, the largest Internet bulletin
board in China, are censored.
B. Bowling is the latest fad in China, with a new
bowling alley opening weekly.
C. China has budgeted 240 million Yuan ($29 million) to
clean up the public toilets.

D. One of China's greatest natural resources is its labor

pool.
E. The Chinese government has a one-child population
control.

105. Geert Hofstede identified all of the following

fundamental differences that can be used to characterize
people in different cultures EXCEPT
A. power orientation.
B. global orientation.
C. social orientation.
D. time orientation.
E. uncertainty orientation.

106. People in the U.S., Canada, and the Netherlands tend

to believe that the person comes first. This refers to
Hofstede's ____ orientation.
A. power
B. global
C. social
D. time
E. uncertainty

107. People in Pakistan and West Africa are more likely to

want immediate gratification. This is an example of
Hofstede's ____ orientation.

A. power
B. global
C. social
D. time
E. uncertainty

108. ____ is the cultural belief that the person comes first.
A. Individualism
B. Power respect
C. Aggressive goal behavior
D. Power tolerant
E. Collectivism

109. People in the United States, Israel, and Ireland are

likely to question their supervisors. This is referred to as
a(n)____ orientation.
A. individualistic
B. power respect
C. aggressive goal behavior
D. power tolerant
E. collective

110. People from which of the following countries are in

the category of uncertainty acceptance?
A. United States

B. Israel
C. Austria
D. Japan
E. Germany

111. In which country do people tend to exhibit relatively

aggressive goal behavior?
A. Japan
B. United States
C. Germany
D. Norway
E. Mexico

112. Which of the following statements about mediumsized international business organizations is TRUE?
A. Many are still primarily domestic organizations.
B. They are much more selective about the markets they
enter than are MNCs.
C. They depend more on international specialists to help
them manage their foreign operations than do MNCs.
D. They tend to compete with foreign businesses in their
own domestic market.
E. All of these choices

113. Top executives at BBT Corporation set the strategic

direction for the firm at corporate headquarters. BBT's

local managers are then informed of these strategies and

given complete freedom to implement them. Which of
the following management functions best describes the
freedom provided local managers?
A. Planning
B. Organizing
C. Decision making
D. Leading
E. Controlling

114. When a local manager is given autonomy and

responsibility in dealing with job design, he or she has
freedom in global
A. planning and decision making.
B. organizing.
C. leading.
D. controlling.
E. None of these choices

115. A manager concerned with time zone differences is

worried about
A. planning.
B. organizing.
C. decision making.
D. leading.
E. controlling.

116. Which management function do differences between

domestic and international production quality
standards fall under?
A. Planning
B. Organizing
C. Decision making
D. Leading
E. Controlling

117. A business that acquires all of its resources and sells

all of its products or services within a single country
is a(n) ____________________.
domestic business

118. A business that has a worldwide marketplace from

which it buys raw materials, borrows money, and
manufactures its products and to which it subsequently
sells its products is a(n) ____________________
business.
Global

119. An advantage of ____________________ operations is

that it is easier to enter markets with a small outlay
of capital.
import/export

120. The quickest way to enter most new markets is

through ____________________.
strategic alliances

121. Enhanced control and existing infrastructure are

advantages of the ____________________ approach to
internationalization.
direct investment

122. A(n) ____________________ is a special type of strategic

alliance in which the partners share in the
ownership of an operation on an equity basis.
joint venture

123. Economies based on ____________________ of business

that tend to let the law of supply and demand
allocate resources are called market economies.
private ownership

124. There are ____________________ member countries in

the European Union.
27

125. The ____________________ replaced GATT and absorbed

its mission.

WTO

126. A country's minerals, oil and forests are a part of the

____________________ environment.
Economic

127. Riots in Egypt, Libya, and Syria changed the political

legal environment for business because of a decrease
in ____________________.
government stability

128. Quotas are

____________________.

the

most

common

form

of

trade restriction
129. A set of countries that agree to significantly reduce or
even eliminate ____________________ among
member nations is referred
economic community.

to

as

an

international

trade barriers

130. Religion is part of the ____________________

environment that affects firms operating in the
international environment.
Cultural

131. Americans who want government run health care for

everyone have a social orientation toward

____________________.
Collectivism

132.
Flat
organizations
____________________.

tend

to

have

power

Tolerance

133. People in cultures with ____________________ are

stimulated by change and thrive on new opportunities.
uncertainty acceptance

134. The manner in which people are motivated to work

toward different kinds of objectives refers to
____________________ orientation.
Goal

135. The United States and Germany tend to have an

intermediate ____________________ orientation.
Time

136.
Most
small
businesses
rely
on
simple
____________________ or ____________________ operations (or
both) for their international sales.
importing, exporting or
exporting, importing

137. The management functions that constitute the

framework
for
this
book?____________________,
____________________,
____________________,
and
____________________ are just as relevant to international
managers as to domestic managers.
planning and decision making, organizing, leading,
controlling

138. Supervising a group of five managers, each of whom

is from a different state in the United States, is likely to be
much ____________________ than supervising a group of five
managers, each of whom is from a different culture.
Simpler

139. MNC stands for ____________________.

multinational corporation
140. Match the following. You may use a response once,
more than once, or not at all.
1. Characterized by clusters of countries that engage in
high levels of trade with each other.
Multinational business 3
2. Based primarily in one country but gets a significant
share of its resources/revenue from other countries.
Domestic business 5
3. Transcends national boundaries and has a worldwide
marketplace for its resources and products/services.
International business 2
4. Characterized by private ownership of property and
allocation of resources by the law of supply and demand.
Market economy 4

5. Acquires most of its resources and sells most of its

products in one country.
Market system 1

141. Match the following. You may use a response once,

more than once, or not at all.
1. People willing to challenge authority have
Passive goal behavior 2
2. Cultural emphasis on social relationship and
quality of life.
orientation 3

Short-term time

3. People who prefer immediate rewards.

Uncertainty avoidance 4
4. People who
Individualism 5

dislike

ambiguity

and

5. Cultural belief that one person comes first

tolerance 1

change

have
Power